Exempt biotech, pharma from service tax, MAT: Kiran Mazumdar Shaw

Kiran Mazumdar Shaw, CMD, Biocon, has backed for a conducive policy regime to attract higher investments in India's pharmaceutical and biotech sectors. India's pharma and biotech industry has the potential to generate combined revenues of $100 billion by 2025, she says in an interview with Soumonty Kanungo. Edited excerpts:

Uday Mohitedna

What are your demands for the pharmaceutical sector from the budget?
India's pharma & biotech industry has the potential to generate combined revenues of $100 billion by 2025, up from the current $20 billion. For this, it will need annual investments of $4-5 billion for the next five years. To realise this quantum of growth and absorb this level of investments, the right policy framework needs to be put in place. The sector must be provided with incentives through a number of tax-friendly measures to make in globally competitive.

The pharma-biotech sector must be exempted from service tax and minimum alternate tax (MAT) on exports. Exempting pharma & biotech SEZ units from MAT will make investments attractive. Extending the 5-year tax holiday for these SEZs by two additional years will factor in regulatory time lags typical to these projects.

All indigenously developed biotech drugs should be exempted from taxes and excise duty. Also, government tenders must give a 15-20% weighted advantage to in-house produced drugs.
There should be incentives to encourage the flow of capital through seed funds, risk capital and venture funds to small and medium enterprises (SMEs) in the pharma-biotech sector to help them move to the next level.

Do you feel the government should offer special incentives to those who are involved in research and innovation?
The government needs to provide incentives for nurturing innovation and encouraging breakthrough research.

As much as Rs 4,000 crore collected as R&D cess had to be remitted to the consolidated fund of India because of the government's failure to deploy these much-needed funds to spur innovative research in industry or academia.

Going forward, at least 75% of the annual R&D cess must be deployed in innovation in life sciences across the value chain from discovery to commercialisation.

Domestic pharma and biotech companies have been investing incrementally in innovation across drugs, vaccines, diagnostics, bioinformatics, biofuels, enzymes and agri-sciences. The government needs to supplement these efforts by extending the current benefit of weighted tax deduction for in-house R&D expenses to spending on international patents, global clinical studies and other outsourced services.

Also, the departments of science & technology and biotechnology should allocate a substantial part of the R&D cess collected annually to support research efforts across the life sciences innovation value chain.

There is a slowdown in clinical trials and new drug approval this year so far, thanks to the apex court's directives. Your comments on this?
India's image as an attractive hub for drug innovation has taken a hit from the snowballing of the clinical trials controversy. With global sponsors exiting, Indian contract research services providers have seen revenue halve from the $1 billion achieved in 2012.

If India wants to pursue drug research and drug innovation, the present moratorium on clinical trials must be removed post haste. Additionally, the proposed regulations and strictures around conducting clinical trials need to be revisited. Most of the regulatory recommendations are impractical and will severely disadvantage Indian drug research.